J.C. Penney's added to the gloom in the U.S. retail sector with falling quarterly sales and shrinking profit margins. Fred Katayama reports.
Like Macy's and Kohl's, like J.C. Penney. The department store operator's quarterly net sales fell. So did sales at its existing stores, surprising analysts, who had expected a solid increase. The culprit was the same as that dogging its rivals: shoppers shunned apparel. Cowen analyst Oliver Chen calls the trend an "apparel recession." Baird analyst Mark Altschwager said that slowing comparable sales consistent with peers shows that "...recapturing share will be an uphill battle." The retailer managed to cut its loss by more than half. But much of that was attributable to cutting costs. Its gross margin shrank because unseasonable weather forced the retailer to mark down prices. Penney's best performing divisions included Sephora cosmetics and footwear but didn't outline what didn't sell. The retailer cut its forecast for margin growth but still expects comparable sales to be positive for the year, citing the strength of its Sephora business and the rollout of appliances at more stores. Penney also said its turnaround remains "on track." But investors weren't taking any chances. Penney's shares dropped sharply in early trading, deepening its 16 percent loss over the last month.